How to Figure out the Earnings per Share on a Simple Income Statement

by Lisa S. Kramer

    Earnings per share (EPS) is a financial metric that measures the profitability of a company's stock on a per-share basis. EPS serves as an indicator of a company's performance and is useful for comparing the profitability of different companies' stock. Most companies include their EPS on their income statement. If not, you can calculate EPS using other information contained on the income statement.

    Step 1

    Obtain a copy of the company's income statement. A publicly-traded company must submit their financial statements to the U.S. Securities and Exchange Commission (SEC) on an annual (Form 10-K) and quarterly basis (Form 10-Q). A company must include its income statement in these filings. To locate a company's SEC's filings, search the Next-Generation EDGAR system on the SEC website.

    Step 2

    Determine the company's net income after income tax. This amount is typically listed near the bottom of the company's income statement. For example, assume that for Year Y, Company C's net income after income tax was $11 million.

    Step 3

    Determine the company's preferred dividends paid out to holders of preferred shares of the company. If the company paid out preferred dividends, the amount paid out is typically listed on the company's income statement. For example, assume that for Year Y, Company C paid out $500,000 in preferred dividends.

    Step 4

    Determine the company's number of shares of common stock outstanding. This number is typically located on the company's income statement. For example, assume that for Year Y, Company C had $3 million shares of common stock outstanding.

    Step 5

    Subtract the number you obtained in Step 3 (the amount of preferred dividends paid out) from the number you obtained in Step 2 (the company's after-tax net income). Continuing with the same example, subtract $500,000 from $11 million to get $10.5 million.

    Step 6

    Divide the number you obtained in Step 5 (after-tax net income less preferred dividends paid out) by the number you obtained in Step 4 (number of shares of common stock outstanding). The result will be the company's EPS. Continuing with the same example, divide $10.5 million by 3 million shares to get an EPS of 3.5.

    Tip

    • The SEC's Next-Generation EDGAR System only contains company filings and financial statements beginning in 1994. To find a company's income statement from before 1994, try contacting the company's investor relations department and requesting an income statement from a specific period in time. Also, some public libraries and university business libraries have older annual reports from available on microfiche or in an electronic research database.
    • If the company does not list the number of shares of common stock outstanding on its income statement, you should be able to find this information listed in either the stockholder's equity section of the balance sheet or in the capital report section of the company's annual report or quarterly report filed with the SEC.

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    About the Author

    Lisa S. Kramer is a licensed attorney practicing civil litigation and estates and trusts law in southern Florida. She received her Bachelor of Arts in English from the University of Florida, where she graduated Phi Beta Kappa and cum laude. Kramer earned her Juris Doctor from the University of Florida Levin College of Law.

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